The Federal Board of Revenue’s (FBR) Member Audit has affirmed the transparency of the audit selection process for the tax year 2011, based on computer balloting and specific parameters. After a prolonged legal battle between taxpayers and the FBR, the Member Audit issued an order, bringing resolution to cases selected for audit in 2011 that had been in litigation for years.
In the issued order, the FBR Member Audit emphasized that the audit selection process was conducted justly, fairly, and transparently in accordance with the law, as per the available record. The decision brings closure to cases that were subject to litigation after being selected for audit in 2011.
The background leading to this decision involves the FBR’s initial selection of audit cases for the Tax Year 2011 through computer balloting and subsequent legal challenges from taxpayers. The Lahore High Court set aside the initial selection, directing the FBR to frame separate parameters for each tax type and initiate the audit selection process afresh.
In compliance with the court’s directive, the FBR conducted a fresh selection for the Tax Year 2011 through computer ballots, following specified parameters. Despite Review Panels addressing applications, dissatisfaction led to further challenges in the Lahore High Court.
The court, in the case of M/s JDW Sugar Mills Ltd vs. Federation of Pakistan, directed the FBR to constitute a High Powered Audit Commission to resolve disputes regarding the selection of audit cases. The commission decided to maintain uniformity and apply the Audit Policy equally to all cases selected for audit for Tax Year 2011, including those specified in the Lahore High Court’s earlier judgment.
Challenging the decision of the High Powered Commission, certain taxpayers, including M/s Defense Housing Authority, filed petitions before the Lahore High Court. After hearing both parties, the court issued directions to the Member Taxpayer Audit (TPA) to address the matter.
In response, letters were issued to petitioners to file representations before the Member (Audit), resulting in certain taxpayers filing their representations afresh. The FBR Member Audit emphasized the Supreme Court’s judgment, highlighting that the power to select for audit through random or parametric balloting is provided by law. The court clarified that its role is not to devise policies but to offer useful pointers for future policy formulation.
The decision brings clarity and resolution to a complex and protracted legal issue surrounding the audit selection process for the Tax Year 2011.
